A reforming department

Peter Cheney considers the tough task awaiting the new Department of Public Expenditure and Reform. External examples of change, especially from the UK, will have a strong bearing on the brief.

Reforming the public sector is the unfinished business from Ireland’s boom years. The state can no longer afford a large workforce but unions will fight strongly to protect posts.

The state-employed workforce grew alongside the real economy, from 233,078 in 2000 to 309,804 last year. Health staff are the largest single group (109,100). Jobs have already started to go with a 9,032 decrease over 2009-2010, down 2.8 per cent, and employees have also felt considerable financial pain through levies and pay cuts.

Public pay and pensions cost €17.3 billion (net) in 2010, down 6.2 per cent on the previous year. Net public spending in Budget 2011 totals €46.1 billion.

The Programme for Government anticipates 18,000 to 21,000 fewer public sector jobs by 2014, with another 4,000 going the next year. This continues the trajectory set down in An Bord Snip Nua. Such a goal, it claims, should be reached without compulsory redundancies in accordance with the Croke Park deal, but “fundamental change” is needed to help a smaller workforce provide front-line services.

Brendan Howlin has assumed the new mantle of Minister for Public Expenditure and Reform, and his namesake department will soon take shape.

Howlin pipped Joan Burton to a financial post but his brief puts Labour between an obvious rock and a hard place. No party of the left will relish cutting 25,000 jobs, many held by its own voters, although an unfettered Fine Gael would have cut 30,000.

Speaking to RTÉ, Howlin said that most civil servants and public servants wanted reform and value for money, as they were also taxpayers. Staff who were “not fully utilised” could be moved to other positions under the Croke Park Agreement or offered voluntary redundancy. He added that reform had receive “lip service” in the past.

The department’s main positive is its potential to improve public services. ‘Spending departments’ will come to Howlin with their funding bids, which grants him a similar status to the UK’s Chief Secretary to the Treasury. Indeed, many of the structural changes come from British examples studied by Fine Gael.

Both parties want a ‘strategic centre’ in government, which explains the current reshuffling of officials inside Government Buildings. The new department will therefore combine the following:

• The Department of Finance’s sectoral policy and public service management divisions;

• The Department of the Taoiseach’s public service modernisation division.

While organisationally separate from the Department of Finance, the new department will share the same building as its predecessors on Merrion Street. Their two roles are essentially intertwined. Public revenue must first be raised or borrowed from the EU-IMF bail-out.

This reform would free up a more focused Department of Finance to focus on the bail-out talks, with the Taoiseach’s smaller ‘cabinet office’ department overseeing the Programme for Government’s delivery.

Labour’s manifesto stressed the importance of communicating all aspects of change to staff. A government department would also have to prove the case for any new agencies. Programmes which do not meet their objectives, measured by a cost-benefit analysis, would be wound down.

Choice and voice

According to the Programme for Government, the end result should be “choice and voice” for citizens. In practice, this would involve allowing schools and hospitals to change staffing levels and working practices, so that local needs are met. Public services would be opened up to a range of providers “where appropriate”, thus allowing for services run by the private and voluntary sector.

Comprehensive spending reviews are periodically carried out by the UK Treasury, and set the fiscal parameters for all parts of the public sector. The last two were in 1998 and 2007; last year’s exercise was a spending review but not a comprehensive one, despite being widely described in those terms. The Government has pointed to Canada’s example, where public spending was cut by a fifth in the 1990s.

Private sector experts in change management will be brought in and a new management tier established, to rotate senior civil servants cross the public sector. The high level strategic goals of organisations will be matched with goals for individual public servants, to encourage better performance. Employees will, in turn, be encouraged to put forward their own suggestions for improvement.

Fine Gael proposed the abolition of agency boards, with managers directly accountable to ministers; this reflects the UK’s “executive agency” model. The North’s Department of Justice, for example, has five agencies, which run the court, prison, forensic science, youth justice and compensation services.

Government proposals also include a ‘Whistleblowers’ Act’, an end to implied delegation of ministerial power to civil servants, and a single access point for government services, similar to New York’s 311 number.

One early decision facing the Minister follows on directly from the EU-IMF terms, which started a review of the joint labour councils. These are currently chaired by union officials and business groups have called for their abolition.

Howlin’s direction of travel will become clearer over the coming months and, as with all areas, it will involve compromise. Criticism from unions and the left is inevitable but the former INTO official will also be seen as the ministerial voice of public sector workers on the Cabinet’s Economic Management Council.

Business senses ‘urgency’

Creating a Department of Public Expenditure and Reform is a good idea and in line with international practice. Minister Howlin should actively drive public sector reform, which is an urgent priority. The previous Government had allocated a junior Minister to this task, but he could never have had the influence of a senior Minister.

In addition, taking the management and monitoring of allocated expenditure across government departments out of the hands of the Minister for Finance frees him up to focus on the big-picture issues of correcting the public finances, repairing the banking system, and interacting with our international partners in relation to our debt repayment commitments.

Finola McDonnell
Head of Public Affairs, IBEC